Burning Money to Make Money

Zimbabwe’s economy might be in the doldrums but there are people there who are making a lot of money. Patrick M at Zimbablog wrote an article on ways of making money in Zimbabwe, “The 13 best ways to make money in Zimbabwe”. He outlines a few things that people have been doing to make themselves ridiculously rich. Some of the methods highlighted in his post include selling fuel, trading in forex and Zim dollars (believe it or not), selling food and alternatives to beating the frequent power cuts. That is not all people are doing to make money. The diamond craze that hit the country a couple of years or so ago is till very much alive despite the efforts of police to try and stop their illegal mining and dealing.

The other day I caught wind of another way in which people are making money called ‘burning money’ where people take advantage of the very wide gap between the cheque rate and the cash rate of the US dollar against the Zimbabwe dollar. If you want to cash your US dollars you will get a much lower rate for it than if you were to go to the bank and exchange it for Zim dollars which are deposited into your account at a much higher rate. For example, if you cash US$50 it would be at a rate of lets say 30 000:1 and if you were to exchange it at a bank with the funds being deposited it would be at a rate of lets say 2,180,000,000:1.

The most obvious choice would be to exchange the money using the bank transfer rate but the problem comes when you want to withdraw your billions of dollars from the bank. If you have contacts at the bank you withdraw the money and then go to parallel market to buy US dollars at a rate of lets say 40,000:1. If you do the math you can see that you end making a very good profit. For those that cant get that amount of money out of the bank, what they do is go to a company and buy some sort of goods such as cement or Econet’s pre-paid buddie top-up cards with a cheque and sell them on the streets for cash.

The kinds of profits that people who ‘burn money’ make can be a bit mind boggling with the number of figures involved in the calculations but those who deal with them on a daily basis are used to it.

One thing though is that with people managing to make huge amounts of money from their forex in both US and Zim dollar terms, a number of industries or should I say those that are left are struggling to survive. They are struggling to survive because everyone is out there trying to get their hands on some of that money and those that have the money are clearing out companies and selling their goods.

Some may see this as being immoral and that the people who are out there carrying out such trades are further destroying the economy. The authorities may be out there trying to clamp down on such activities but as they close more and more loopholes and make it harder to carry out these trades, people are finding other ways of making ridiculous amounts of money. The way I see it, it’s just survival. It’s amazing how people can thrive in chaotic conditions.